FDIC Law, Regulations, Related Acts

4000 - Advisory Opinions

Insurance Coverage of Packaged Affiliate Certificate
of Deposit Program

FDIC-86-15

May 22, 1986

Roger A. Hood, Assistant General Counsel

Thank you for your letter of May 8, 1986, addressed to Deputy
General Counsel Douglas Jones. You describe *** Packaged Affiliate
Certificate of Deposit Program ("PAC Program") as follows:

Under the PAC Program, a customer places funds at one of the
Subsidiary Banks (the "Placing Bank") and instructs it to wire
transfer for deposit for his account up to $100,000 in any one or more
of the other Subsidiary Banks (the "Depository Bank"). Pursuant
to such instructions, the Placing Bank transfers up to $100,000 of such
funds to each Depository Bank in the name of such customer. Therefore,
the Subsidiary Bank has received a deposit, established an account in
the name of a customer and has caused the issuance of a certificate of
deposit evidencing such deposit.

You ask Mr. Jones to "confirm . . . that, since each
Subsidiary Bank actually receives the funds, establishes an account in
the name of such customer and causes the issuance of a certificate of
deposit in the name of the customer, each account established by a
Subsidiary Bank pursuant to the PAC program is eligible for FDIC
insurance." Mr. Jones has forwarded your letter to me for reply.

Based on my understanding of the PAC Program, it appears to me that
the program does what it sets out to do--that is, create a depository
relationship directly between the customer and each "Depository
Bank." Accordingly, the customer's deposits at each "Depository
Bank"--both those placed through the PAC Program and any other
deposits he may have placed himself--would be insured in the aggregate
up to a maximum of $100,000.